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India’s steel exports to Europe are expected to decline once the European Union’s Carbon Border Adjustment Mechanism (CBAM) – effectively a carbon tax on imports – takes effect from January 1, 2026.
Currently, roughly two-thirds of India’s steel exports are shipped to Europe. The new levy will raise the landed cost of Indian steel, especially material produced via the blast furnace–basic oxygen furnace route, which has higher carbon emissions. This is likely to erode margins and competitiveness for Indian mills in the EU market.
Industry executives and analysts say steelmakers are now exploring alternative markets in Africa and the Middle East, while also counting on strong domestic demand driven by infrastructure spending to absorb more volumes at home. At the same time, producers face pressure to accelerate decarbonisation plans, including greater use of electric arc furnaces and low-carbon technologies.
There is still uncertainty among companies over how CBAM liabilities will be calculated and whether rates will differ by producer, adding to planning challenges. In the near term, the mechanism is expected to slow India’s steel exports to the EU, even as policymakers continue diplomatic efforts to seek relief and push for global climate measures that are more equitable for developing economies.
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